The Madras High Court ruled that a lender who advanced a substantial cash loan cannot be forced to disclose his PAN to the Income Tax Department, but allowed trial court records to be sent to tax authorities for scrutiny of the high-value cash transaction, income tax compliance, PAN disclosure rules, and financial investigation.
CHENNAI: The Madras High Court ruled that a lender who advanced a cash loan cannot be compelled to disclose his PAN to the Income Tax Department. However, the court did permit the trial court’s files to be forwarded to the tax authorities for closer examination of the large cash amount involved.
Case background
In June 2016, Mr. Venkateshan lent Rs 80 lakh in cash to Mr. Sait at an annual interest rate of 12%. Sait signed a promissory note promising repayment but failed to honor it. Venkateshan therefore initiated recovery proceedings based on the promissory note.
Sait responded by asking the trial court to direct Venkateshan to disclose his PAN and to send a copy of the plaint and supporting documents to the relevant Income Tax authorities for investigation under Section 269ST of the Income Tax Act. The trial court granted that application.
Dissatisfied, Venkateshan appealed to the Madras High Court. On January 7, 2026, the High Court partially allowed his petition: it held that he need not disclose his PAN to the tax department but confirmed the trial court’s order to transmit the plaint and documents to the Income Tax Department for scrutiny. The recovery suit itself remains pending before the trial court.
Relevant provision and Supreme Court Guidelines:
Section 269ST: Mode of undertaking transactions.
No person shall receive an amount of two lakh rupees or more
- (a) in aggregate from a person in a day; or
- (b) in respect of a single transaction; or
- (c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.
The Madras High Court noted that Section 269ST prohibits receiving Rs 2 lakh or more in cash (after the provision came into effect) and that contravention attracts a penalty under Section 271DA equal to the amount received. The provision was enacted to discourage black-money transactions by promoting digital payments for amounts above Rs 2 lakh.
The High Court relied on the Supreme Court’s decision in Correspondent, RBANMS Educational Institution v. B. Gunashekar [2025] 173 observing that the Supreme Court had issued guidelines addressing large cash payments in civil litigation.
The Madras High Court quoted the Supreme Court’s directions:
“When a suit is filed claiming Rs.75,00,000/- paid by cash, not only does it create suspicion on the transaction, but also displays a violation of law. Though the amendment has come into effect from 01.04.2017, we find from the present litigation that the same has not brought the desired change. When there is a law in place, the same has to be enforced. Most times, such transactions go unnoticed or not brought to the knowledge of the income tax authorities. It is a settled position that ignorance in fact is excusable but not the ignorance in law. Therefore, we deem it necessary to issue the following directions:
(A) Whenever, a suit is filed with a claim that Rs 2,00,000-and above is paid by cash towards any transaction, the courts must intimate the same to the jurisdictional Income Tax Department to verify the transaction and the violation of Section 269ST of the Income Tax Act, if any,
(B) Whenever, any such information is received either from the court or otherwise, the Jurisdictional Income Tax authority shall take appropriate steps by following the due process in law,
(C) Whenever, a sum of Rs 2,00,000 and above is claimed to be paid by cash towards consideration for conveyance of any immovable property in a document presented for registration, the jurisdictional Sub-Registrar shall intimate the same to the jurisdictional Income Tax Authority who shall follow the due process in law before taking any action,
(D) Whenever, it comes to the knowledge of any Income Tax Authority that a sum of Rs 2,00,000 or above has been paid by way of consideration in any transaction relating to any immovable property from any other source or during the course of search or assessment proceedings, the failure of the registering authority shall be brought to the knowledge of the Chief Secretary of the State/UT for initiating appropriate disciplinary action against such officer who failed to intimate the transactions”
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Observations of the Court and Final Order
The High Court did not rule on whether the Rs 80 lakh in this case was reflected in the lender’s income tax returns. It emphasized that although Section 269ST took effect after the transaction in question, large cash dealings merit the Income Tax Department’s attention even in the absence of that statutory provision.
While the High Court confirmed the trial court’s order directing the court’s ministerial officer to forward the plaint and documents to the jurisdictional Income Tax Authority, it set aside the directive requiring Venkateshan to disclose his PAN to the respondents.
The High Court noted that the Supreme Court’s guidelines do not mandate disclosure of a litigant’s PAN, and a litigant cannot be compelled to reveal it in this context.
The Civil Revision Petition was partly allowed. The portion of the trial court order directing disclosure of the petitioner’s PAN was set aside, while the direction to forward the plaint and documents to the Income Tax Authority was upheld. No costs were imposed, and the connected miscellaneous petition was closed.
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